Cadbury and Pepsi Bottling
Group Reach Cadbury's Dr Pepper/Seven Up unit (DPSU) says "multi-year agreement" reached with Pepsi Bottling Group (PBG) to "ensure future growth and security for DPSU soft drinks in the PBG system." Cadbury global beverage CEO John Brock: "We're delighted that our outstanding brands will have a secure route-to-market through PBG." Deal seen as similar to extension/protection agreement reached between DPSU and Coca-Cola Enterprises in January (BD 1/23/98). DPSU and PBG do not specify details of agreement. But industry executives say: 1) PBG agrees to performance standards for DPSU brands and to specific time periods for retaining brands. 2) DPSU provides PBG with advance consents to franchise transfers in connection with PBG's planned IPO and future bottler acquisitions. Views. PBG executive: "DPSU's brands are an important part of PBG's product portfolio. This agreement extends our relationship, so in that light, it's business as usual." Industry executive: "This likely ensures the future of Dr Pepper in PBG, both now and down the road." UK analyst: "This shows the power of Dr Pepper." Storm. Pepsi currently tests new lemon-lime CSD, Storm. Brand -- now available to 10-12% of US population -- competes with Sprite and 7UP. When Storm test began (BD 3/6/98), industry executives speculated PBG would drop 7UP, if Pepsi rolled out Storm. 7UP is in about one-third of PBG system, and PBG handles 13.2% of 7UP's US volume. New PBG/DPSU agreement seems to preclude that for now, though length of new agreement not specified. Pepsi executive: "Storm is still very much in a test mode. As we speak, Pepsi One is the bigger idea." Industry executive: "For the next few years, Pepsi will use Storm regionally where (PBG) or other bottlers don't have 7UP. It will replace Slice." Sanford Bernstein's Bill Pecoriello: "Strategically in the long run, Pepsi needs its own national lemon-lime in its portfolio."
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